Reflecting on the US tariffs, Health Innovation Network South London CEO Dr Rishi Das-Gupta asks: what are the opportunities for UK Healthtech?

The recent news surrounding new tariffs on UK health tech and medical device imports has created potential challenges for healthcare companies. In this blog, our Chief Executive Officer, Dr Rishi Das-Gupta, outlines several strategies for companies on how they can navigate these evolving conditions.

On April 2, the United States enacted new tariffs affecting imports of health tech and medical devices. UK companies face a relatively lower tax rate of 10% compared to other countries such as the EU, India, and China. This situation presents strategic challenges for expanding UK and European companies, as the US market is crucial for the health tech sector. Key uncertainties include whether software products fall under the tariffs, the timing of tariff reviews, and potential retaliatory actions from other nations. Despite these ambiguities, it is clear that the US government aims to prioritise domestic companies and stimulate foreign direct investment (FDI). Considering this evolving landscape, companies must explore the three strategic opportunities outlined here.

Option 1: Relocate to the USA

I do expect some companies to relocate to the USA from the UK as a result of these tariffs. This is a particularly attractive option if the company provides services which fit into the existing US insurer/payor landscape. (i.e., non-disruptive technologies).

Many companies from our DigitalHealth.London Accelerator have refocused towards US customers and have often accessed the market through our accelerator partners in the United States of America. Entering the USA has often meant setting up subsidiaries and dedicated technology infrastructure located within the USA. At this time, it is unclear whether tariffs will apply in the same way to US subsidiaries of UK-headquartered companies. Additionally, this will likely play a key role in whether health tech companies choose to relocate in full or in part to the US.

An additional driver affecting the attractiveness of relocating to the USA is the capital structure of the company and sources of funding during development. Where companies raised money through venture capital routes, attractive reimbursement rates in the US, together with competition among healthcare providers to adopt technology, have meant that the US has been an attractive market for many years. The pressure to relocate to the US could intensify for companies which have VC investors focused on short-term returns and seeking liquidity and potential exits into the US investment market.

Option 2: Refocus on non-US International markets

Companies whose products disrupt the current insurer/provider landscape and offer lower-cost models to provide high-quality healthcare sometimes struggle to access the US market. For these companies, it is less clear that relocating to the US is a significant benefit. Especially when the company is based in a country which chooses to impose retaliatory tariffs upon the USA. A colleague told me that “in a trade war, you have to pick a side”. In addition to increasing focus on the EU, many such companies I have spoken to are interested in expanding into low- to middle-income countries (LMICs). This is because the acceptance of lower-cost models of care and plurality of models in the same healthcare system often offer attractive opportunities for disruptors. Companies that we have spoken to with such models have expressed particular interest in learning more about the Middle East North Africa (MENA) and Asian markets.

However, as each of these markets differs significantly in their payment structure and regulation, they offer unique challenges to market entry. Hence, many companies have chosen to do so alongside a local partner. The importance of regional conferences, such as the upcoming Abu Dhabi Global Healthcare Week or WHX Tech event in September in the Gulf and similar conferences in Asia, such as HealthTechX, has been of particular interest to companies. Particularly for those looking to understand and prioritise markets and to find local partners. In addition to our support at the HIN, support to understand these markets is provided by our partners at the Department for Business and Trade (DBT) and their Healthcare UK programme, ABHI and techUK.

Option 3: Make the UK the base of operations globally

An additional opportunity for UK companies is that the difference (10%) between the current tariff rates on UK and EU companies makes it relatively attractive to relocate to the UK if seeking to address US customers while working with EU/Asian partners. This is especially true if a full relocation to the US is not possible or unattractive because of the need to collaborate with other international partners.

The operating environment is uncertain, driven by the fact that tariffs can be changed rapidly and that the US is creating an environment which is less welcoming to foreigners relocating to the US. This is compounded by a reduction in US governmental funding for research, which is creating uncertainty in the very R&D ecosystems which many tech companies rely on. It is not wise to make a knee-jerk reaction on where to locate a company. However, the creation of partnerships between European countries and UK companies is a key opportunity over the coming month, and we will continue to support this alongside our partners. In this environment, London and the UK continue to be an attractive location to consider when relocating.

Over the coming weeks, we plan to work with our partners to provide additional support and guidance for companies entering the London environment and for companies we have supported seeking to identify how to access both US and other international markets. This is a rapidly developing area, so please sign up for our HIN and DigitalHealth.London LinkedIn pages to get additional information and updates.